Invest with Jac's is a blog to share my personal investment views on how to start and continue to look for valuable companies and properties to invest in.

Tuesday, April 5, 2011

Properties: To buy or not to buy?

Buy! Why?

The new cooling measures by the government are as follows:

1. Seller-Stamp Duty increased to 4 years.

My view - This measure should not be a factor to consider. Because we buy properties to lease out, we will still buy an investment property that can give us good yield. As long as we have the power to hold the property for 4 years, I don't think this factor should pull us back.

2. If you have an outstanding housing loan, you can only take another loan that is only 60% of the purchase price.

My view - This measure is the one that hurts the medium income people the most. For the rich, they have the money anyway, a 20% downpayment or a 40% downpayment is not a concern for them at all. There is going to be a widening of the gap between the rich and poor.

My suggestion - If you have the 40% cash/CPF to do the downpayment, go ahead and buy an investment property and rent it out for the next 4 years. However, do not just buy any property. Buy a property that can give you the best rental yield. Look for a relatively old resale property instead of new ones. Look for one that needs a fair bit of renovation, so that you can bargain down the price. Do a reasonably good renovation to make it look brand new, and guess what, you will have a higher chance to get it leased out than those within the same estate.

If you do not have the 40%, then grow your savings through buying undervalued companies from the stock market. Look out for my second book on how to grow your savings in the stock market, in June/July 2011.

The government has been introducing cooling measures from time to time. One thing that I do not understand is, " Why do our government release more land for sale, allowing them to bid at a high price, and at the same time increase their development charges? Won't all this make the developer increase the selling price of their units and we, the consumers, have to pay that kind of price?"